How Is Crypto Taxed in India in 2026?
India introduced a dedicated crypto tax framework through the Finance Act 2022, which came into effect on April 1, 2022. Two years on, the rules remain largely unchanged for 2026. If you trade Bitcoin, Ethereum, or any other Virtual Digital Asset (VDA) in India, you need to understand these rules before filing your ITR.
The Two Core Rules of Indian Crypto Tax
Rule 1: 30% Flat Tax on All Crypto Profits (Section 115BBH)
Every rupee of profit you make from selling crypto is taxed at 30% + 4% cess = 31.2% effective rate. This applies regardless of:
- Your income tax slab (even if you are in the 0% or 5% slab)
- How long you held the asset (no LTCG/STCG distinction for crypto)
- Whether you are an individual, HUF, firm, or company
Example: You bought 0.1 BTC at ₹50 lakh and sold at ₹70 lakh. Profit = ₹20 lakh. Tax = 30% of ₹20 lakh = ₹6 lakh + ₹24,000 cess = ₹6.24 lakh total tax.
Rule 2: 1% TDS on Crypto Sells (Section 194S)
Every time you sell crypto on an Indian exchange, 1% is deducted at source as TDS. This is not an additional tax — it gets credited against your final tax liability when you file ITR. But it does lock up capital temporarily.
Threshold: TDS applies when annual crypto sales exceed ₹50,000 (₹10,000 for specified persons like professionals).
Who deducts: The exchange deducts TDS automatically for Indian-to-Indian trades. For P2P and foreign exchange trades, the buyer is responsible for deducting and depositing TDS — which most retail traders ignore (creating compliance risk).
What Counts as a Taxable Event?
Any of the following triggers crypto tax in India:
- Selling crypto for INR
- Swapping one crypto for another (BTC → ETH is a taxable event)
- Using crypto to pay for goods/services
- Receiving crypto as salary or freelance payment (taxable as income first, then gains on sale)
- Receiving staking rewards, mining income, or airdrops (taxed as income at receipt)
- Crypto-to-crypto trades on international exchanges (even without INR involvement)
Not taxable: Transferring crypto between your own wallets, buying and holding (no sell event).
The No-Loss-Setoff Rule — The Harshest Clause
Unlike equity markets where short-term losses can be set off against short-term gains, crypto losses cannot be set off against any other income — not against salary, business income, equity gains, or even losses from other cryptocurrencies.
Illustration: You made ₹5 lakh profit on Bitcoin and ₹8 lakh loss on some altcoin in the same year. You still pay 30% tax on the ₹5 lakh Bitcoin profit. The ₹8 lakh altcoin loss is gone — it cannot be used to reduce your tax.
This rule makes risk management extremely important for Indian crypto traders.
How to Calculate Your Crypto Tax: Step-by-Step
- Export transaction history from all exchanges (CoinDCX, WazirX, Binance, etc.) as CSV
- Identify cost basis for each sell — use FIFO (First In, First Out) method, which CBDT recommends
- Calculate profit/loss per transaction: Sale Price − Purchase Price − Transfer fees
- Sum all profits (losses cannot be deducted)
- Apply 30% tax to total profit figure
- Check TDS credit from Form 26AS — subtract from tax payable
- Pay advance tax if liability exceeds ₹10,000 (due quarterly)
Which ITR Form to Use for Crypto?
Report crypto income in ITR-2 (if no business income) or ITR-3 (if you have business income). Crypto gains go under Schedule VDA which was added to ITR forms from AY 2023-24 onwards. Do not use ITR-1 (Sahaj) if you have crypto transactions.
Best Tools for Crypto Tax Filing in India
- Koinly: Supports all major Indian exchanges, auto-imports transactions, generates ITR-ready reports
- ClearTax: India's leading tax platform, has a dedicated crypto module for AY 2026-27
- Taxnodes: Built specifically for Indian crypto traders, handles DeFi and NFT transactions
- QuickO: Simple UI, good for traders with straightforward buy/sell history
Penalties for Non-Compliance
The IT Department has access to exchange KYC data and can cross-reference TDS certificates with ITR filings. Consequences of non-filing include:
- Penalty under Section 270A: 50–200% of tax amount for under-reporting
- Interest at 1% per month under Section 234B/234C for delayed advance tax
- Prosecution for deliberate tax evasion (rare for small cases but possible)
FAQs on Crypto Tax India 2026
Q: Can I claim deductions on crypto income?
No. Section 115BBH explicitly disallows deductions under Sections 30–37. Only the cost of acquisition is deductible.
Q: Is crypto gifting taxable?
Gifts exceeding ₹50,000 in value are taxable as "income from other sources" in the recipient's hands. The giver has no capital gains tax unless they sold.
Q: Are foreign exchange transactions reported?
Under FEMA and IT Act, you must report foreign crypto holdings in Schedule FA if total value exceeds ₹5 lakh. Failure to report is a serious offence.
Key Takeaway
India's 30% crypto tax is one of the highest in the world, but the rules are clear. File accurately, use proper tools, and pay advance tax quarterly to avoid interest penalties. The IT Department is getting better at data matching — voluntary compliance is the only safe approach.